Rising prices pushed thousands of Bay Area homes back above water last year, according to a report released Wednesday, another sign that the region's housing crisis is easing as the economy recovers.
The report, by the housing website Zillow, shows drops across the region in the number of homes that are underwater -- worth less than the value of their mortgages.
More than 56,826 homes bobbed back above water across seven counties of the Bay Area in 2012, Zillow reported. That still leaves 205,986 homes with a total negative equity of $31.5 billion.
And that negative equity is keeping thousands of homes off the market, forcing buyers to compete for whatever comes up for sale.
A dozen wealthy Silicon Valley and Peninsula communities from Belmont to Los Gatos have already returned to pre-crash home prices, the company said.
Zillow is forecasting continued growth in prices this year, followed by a leveling off in 2014.
The company uses a proprietary formula to calculate home values.
In the last three months of 2012, a little more than one-third of Contra Costa County's homes that had mortgages were underwater, Zillow reported. That was down from 41.3 percent a year earlier.
The figure for Alameda County was 25.4 percent, down from 31 percent a year earlier, while Santa Clara dropped to 15 percent from 22 percent in the fourth quarter of 2011. San Mateo County had 15 percent of its homes with mortgages underwater,¿¿ down from 20.7 percent a year earlier.
Nearly every part of the Bay Area is seeing a surge in home prices, with the areas that saw the biggest drops following the subprime bubble's burst having the biggest price increases.
Oakland real estate agent Mark Biggins of Redfin Realty said that in some parts of the East Bay, frenzied bidding has caused prices to soar.
"It's crazy in parts of Oakland and Berkeley," Biggins said.
One of his clients just lost out on a home listed at $729,000 that sold for more than $900,000 with 23 offers. "There were five offers over $900,000 for this property. In 2005, that same property sold for $940,000. I think it just sold pretty much for that or more today," Biggins said.
"Eastern Contra Costa County was dramatically overpriced" before the crash, said Bryce Ellsworth, broker at Windermere Ellsworth and Associates in Brentwood. "Now it's underpriced, but that's not going to last for long."
The Silicon Valley corridor extending from Atherton and Menlo Park through Sunnyvale to Los Gatos is essentially back above water, Zillow reported, with median home values what they were before the crash. Many of those communities lost less in the crash and had less to regain.
"Those that have dropped the least have come back the quickest," said Rick Turley, San Francisco Bay Area president of Coldwell Banker Residential.
"I would say the sweet spot would be that whole upper Silicon Valley and Peninsula area," he said. "It probably lost the least amount in the downturn and has come back to new peak highs the quickest."
San Jose, which fell sharply on large numbers of subprime loans, is still more than 20 percent below its pre-crash peak. But recovery also depends on when a person bought the home.
Real estate agent David Contreras, who specializes in condos in San Jose, said the recovery has gone so fast in San Jose that one client who wanted to short-sell her house for around $160,000 six months ago is now above water and planning to stay.
"Her home shot up easily to $235,000 within the span of about six months," said Contreras.
But that's not the case everywhere.
Contra Costa County median home values are still about 48 percent below their peak. Alameda County is 30 percent below, while Santa Clara County is 13.5 percent from its peak and San Mateo is 15.1 percent below it, Zillow said.
San Francisco was the county closest to a return to peak prices, with only slightly more than 3 percent to go.
Contact Pete Carey at 408-920-5419 Follow him on Twitter.com/petecareyg
A sampling of Bay Area cities and the percentage they are below their peak home prices reached between 2006 and 2007
City Change from peak
Hayward -48.6 percent
Oakland -38.8 percent
Livermore -30.1 percent
El Cerrito ...........-26 percent
San Jose -20.6 percent
San Ramon........-18.4 percent
San Mateo..........-15.1 percent
Redwood City......- 5.7 percent
Menlo Park 0.0 percent
Sunnyvale 0.0 percent